US investors traded $217bn of non-US equities in Q2 alone – up 37% year-on-year – as concerns over a concentrated, AI-heavy S&P 500 push them towards value and quality overseas. In this episode of Vantage, we sit down with Jonathan Dickson, head of EMEA at OTC Markets, to find out why household names from Roche and Heineken to Tesco and the London Stock Exchange Group trade there, how companies are winning serious US investor attention without the cost and complexity of a Nasdaq listing, and what smaller issuers need to get right to be found by American money. Watch now to see how your company could tap into one of the fastest-growing pools of capital in the world.
Could you give us a picture of what OTC Markets is and the role you play there?
Jonathan Dickson: OTC Markets is the largest stock market in the United States for non-US equities. Across the market, we trade over about 12,000 securities – mainly international, but also domestic. My role is head of EMEA: I work with issuers and advisers, educating them around US access – how to compliantly and cost-efficiently access the US.
What does the US investor market actually look like in terms of size and the types of investors involved?
Jonathan Dickson: Outside of the depth of capital and the amount of liquidity available in the US, which everyone knows about, there are other parts that are more unknown. Everyone knows the likes of BlackRock, Fidelity and Wellington, but if you go outside of that into the third- and fourth-tier institutions, family offices and high net worth, retail is a very powerful mover in the US as well.
I think that’s the part people don’t often think about. When you’re doing a roadshow, you’re going to New York, Chicago, LA, San Francisco, Boston – but in the US, you’ll tend to find fund managers spread out all over the place. Here, you’re typically going to London or Edinburgh; over there, it’s Salt Lake City, places like Denver, which you probably wouldn’t expect, but you may stop through. So the availability of capital is there in abundance – getting access to it is another thing, but it’s definitely much more spread out than people would normally think.
Looking at the OTC trading data, what key highlights do you think people don’t fully understand about current investor behaviour – including the shift towards diversification amid the AI trade?
Jonathan Dickson: If you think about the S&P, it’s highly concentrated, and then you look over here and think about the valuation gaps – there’s been a recognition from US investors of that. We’ve seen a decoupling in our market, out of US equities into international equities.
To give you some stats: in Q2 this year, we did about $217bn of US volume, the vast majority going overseas out of the US – that’s up 37% on Q2 last year. So it’s a significant recognition of what could be done outside the US. US investors are conscious of the concentration of the S&P – we see it in London too, with the valuations and the amount of M&A activity. That’s definitely a driver, so the statistics in their own right count for that.
I think the other part is that volume generally is up – it’s not just the percentage increase, but the volume in the markets is up. Last year we were just shy of $1tn in volume; I think this year we may go through $1tn. So the activity’s higher, but it’s definitely going overseas.
When you dig into that volume, is it concentrated in small-cap or big-cap names – and which companies trading on OTC tend to surprise people?
Jonathan Dickson: At the higher end of our market, we have the likes of Roche, Adidas and Heineken. We recently had Siemens Energy join this year, JD Sports join this year, and Tesco earlier this year. Last year, the London Stock Exchange Group itself joined our market, on OTCQX, our top tier. It’s a nice window into the US for those issuers, giving them a cost-efficient, compliant, light-touch way of getting access to the US.
But then right down at the other end, we have venture markets, with a lot of small-cap, micro-cap and nano-cap companies wanting to take that first step into the US. That’s the key point, I think: American investors generally have more money, as a liquid market, but they also have a higher risk appetite, so they’ll look at small-cap securities outside the US. Where it’s an AI play, for example, the valuation over here may be significantly less than over there, and they’re just trying to fill that gap.
What are the most common myths or misunderstandings about OTC that you’d like to set the record straight on?
Jonathan Dickson: I think the first myth is that we split liquidity. The difference is that we’re not New York or Nasdaq – it’s not a dual listing. If you do a dual listing, yes, absolutely, you are splitting that liquidity, and generally, because of the volumes in the US, that tends to flow to the US.
In our market, we have level one ADRs – 70% of all American depositary receipts globally trade with us – but we also have the foreign ordinary share. That’s the local share in the primary market, dollarised with a US quote, which allows US investors to trade into it, and a lot of that flow comes back to the primary market – it prints back here. For a US investor, say retail, it looks and feels like they’re trading a New York or Nasdaq security priced in US dollars, but that flow comes back here. So that’s the first myth: that you’re splitting liquidity. You really aren’t.
The second piece is the regulation around it. If you join New York or Nasdaq, for example, you’re registering with the SEC [Securities and Exchange Commission], complying with [the] Sarbanes-Oxley [Act], and reconciling to US GAAP – so you’re duplicating your reporting, and there’s a lot of cost associated with it. With OTC, less so, because you’re simply leveraging your home market disclosure under an SEC exemption to have that US dollar quote. There’s a risk piece too: if you’re doing a dual listing, you’re on the SEC’s radar because you have to be registered. But with this, you’re just leveraging a primary market. That’s the key thing – you’re not splitting liquidity, and you’re not putting yourself under much more additional risk.
Beyond avoiding dual reporting, SEC registration and fragmented liquidity, is there anything else issuers considering US access should know about OTC?
Jonathan Dickson: I think the key part is that you should have a plan. If you’re a UK, European, or any issuer outside the US, you need an investor relations strategy for a start. We’ve had a relationship with Edison for about half a decade, as an example – because if you’re going to the US, you’re likely going to be a smaller player in a massive pond, and you have to get the attention.
To my earlier point, you’re not issuing shares, you’re not registering with the SEC, you’re not having an IPO or a liquidity event, so you have to have a strategy to generate what’s going to happen in the US. There are some companies that just resonate with US investors, and it’ll just work – but for the most part, you need a plan to be fully tradable and fully accessed in the US.
Are there companies you’d highlight as good examples of getting their US IR strategy right?
Jonathan Dickson: There are several companies that have done it well this year. We run the gamut from right at the top, with bigger companies that just have a US strategy – Roche, for example, has a full team in New York looking after their IR, and they just move through the motions because they know how to do it, and it’s done well.
Coming down to the smaller level, we had XL Technologies out of Paris join last year – in the military drone business. Their share register quickly went quite US-centric; they had an IR plan, and they’ve just been taken out by a bigger player in France. So that worked for them.
In the UK, we have several companies that we work with, together with you guys. I think it’s just about constantly touching on that point: have a plan, have a strategy, don’t go in blind. I think that works well.
Where should people go to learn more about OTC Markets or the US market more broadly?
Jonathan Dickson: You can get our details on our website. We have a team in London that we’ve had for about eight years now. I just got back from Hong Kong last week – we’ve opened an office there because we’re seeing interest from APAC investors, for example, in European equities priced in US dollars. So we have a team in APAC as well; our head office is in New York, but for any European issuers, we’re here in London.
